- HR needs to move at Internet speed
- HR must become an ROI department
- HR must become a competitive advantage
- HR must help build a performance culture
- Shifting our HR strategy with the changing economy?
- Providing managers with effective people management tools
- Agile HR anticipates & “connects the dots”
- Changing who does most HR work
- The shift from “HR cop” to productivity consultant
- Everything is “pay for the service level”
- Changing the people within HR
- 8 to 5 vs. 24/ 7 and smoke detectors
- Dumb systems are replaced by databases that “learn”
- Assessing customer satisfaction
WHERE HR IS NOW
THE 14 REQUIREMENTS OF THE NEW DNA
Unfortunately, HR does not exist in a vacuum. The business world is changing at an increasingly faster rate and so to must HR. Furthermore, mergers, globalization and new technologies are fundamentally changing the way business is done. HR must respond to these changes with more than its traditional “do more with less” approach. It needs to revamp everything it does. It doesn’t just need a facelift, the entire DNA of HR needs to be changed!I. HR needs to move at Internet speed
Most HR functions are reactive in nature. Unfortunately the business world is changing at an increasingly faster rate. Because of that, when HR gets overburdened and falls behind there is little or no time to catch up. In the new world of business, there are only the fast and the dead! Instead of developing programs slowly in response to a demonstrated need, new HR programs will have to be developed in advance of their actual need or “just in time”.
In a fast changing world, world class HR becomes a moving target! The new DNA requires that you must aim ahead of (not at) a moving target if you expect to hit it. The business winners of tomorrow will figure out how to meet the needs of the business up to a year or more ahead of time. It must aggressively hit that target all while continuously forecasting future HR and business needs. In short, HR will be expected to lead organizational change, and to do it at Internet speed.
II. HR must become an ROI department
As technology and the popularity of outsourcing expand, HR will be under increasing pressure to act like an ROI (return on investment) department. All overhead functions will come under this increasing pressure to demonstrate their value. Responsible heads of HR will respond by becoming more financially focused and accountable. Excellent HR departments will work directly with the CFO in order to become more data driven and credible. Under the new DNA, every HR program will be assessed on a “zero-based budgeting” basis, which assumes you add no value unless you can prove otherwise. HR programs will automatically “expire” unless they are renewed. HR’s charge will be to continually shift resources from low return HR programs toward those that produce higher return. Rather than waiting for the CFO to cut our budget, HR must be proactive and seek out ineffective HR programs on their own and then eliminate them!
Our number one opportunity is to transform HR into a competitive advantage, not just to offer “cookie cutter” HR programs. HR has traditionally been internally focused and “cooperative” in nature, often sharing benchmark information. However, the new DNA requires that HR become more competitive and secretive. HR must learn to do direct, side-by-side HR program comparisons (also called a competitive analysis) and to insure that each of our primary HR functions perform at a superior level to that of the HR function at our direct product and talent competitors. Becoming a competitive advantage also means anticipating the moves (or the counter moves) of our competitors so that we can continually outperform them. The new DNA also means that HR must learn how to gather HR related information on its competitors through competitive intelligence, while at the same time protecting the secrecy of our own practices. Instead of keeping up with the Jones’ the new DNA focuses on making our firm the dominant player in the industry, as a result of its people practices.IV. Building a performance culture
For some unknown reason HR spends most of its time on the bottom performers in a firm. In sharp contrast, product managers learn rapidly that 80% of their profit comes from the top 20% of their products. Similar ratios can be found in people management. Under the new DNA, HR must learn to prioritize its time and services and focus on the jobs and the programs with the highest impact. HR must limit the time it spends on low performers and on fixing mediocre people programs. Under the new DNA it must focus its efforts on building a performance culture (a culture that measures and rewards performance and results). If the entire organization is to be the top performer in its industry then each and every HR program must focus on performance improvement. Unfortunately most HR programs focus on equality and “sameness” where the new DNA requires significant differentiation, based on performance. Instead of rewarding effort, past loyalty and seniority HR must ensure that all programs focus on measuring and rewarding business results as well as on continuous improvement.
Regarding people management, it has always been interesting to me that most HR functions blatantly fail to reward managers for great people management (attraction and retention) even though HR controls the compensation and performance appraisal processes. The new DNA demands that at least 20% of the manager’s pay be based on managing talent and increasing people productivity. It also requires that the ranked “people management” metrics of all managers be automatically distributed to all managers throughout the firm each quarter.
V. Shifting our HR strategy with the changing economy?
When you ask most managers what the name of their firm’s HR strategy is, you generally get a blank look (incidentally HR people often respond with the same “I don’t know”). If HR is to be strategic, it must have a clear written strategy that has been communicated to and understood by all. The new DNA demands that the strategy be agile, capable of flexing, and adaptive to changes in the economy. Traditional HR practices and strategies have remained constant even though shifts in the economy have a direct impact on the effectiveness of recruiting, retention, pay, and stock option programs to name a few.
However for some reason, most HR departments have failed to link their internal HR programs to the economic indicators of their region. As a result, HR programs are often implemented or modified independently and at the wrong point in the economic cycle. In addition most HR strategies are also applied consistently around the world even though it is obvious that economic conditions do vary significantly from region to region. To be effective, HR must learn to forecast economic conditions and then to modify its strategy as those economic and business factors change.
Few HR professionals are truly experts in their own field. They often recommend tools and practices to managers when in fact they have little or no hard evidence to show which tools and practices are the most effective in different situations. If managers are to be effective, they need to know which tools:
- Increase people productivity
- Will get top performers to stay
- Improve a manager’s ability to motivate and challenge their employees
- Produce recruitment sources that identify top performers
- Identify recruitment sources that produce hires that have low turnover rates
- Increase a manager’s offer acceptance rate
- Identify which training is most effective
- Identify the pay “type” that increases performance of the best
The new DNA says that HR can no longer assume that its programs and tools are effective. Instead, they must proactively gather metrics and data to prove which people management tools have the most impact. Here are some of the key requirements you should consider:
if they are to gain the respect of their managers.
VII. Agile HR anticipates & connects the dots
Most HR functions and programs operate independently of each other (as silos) and most fail to track against business results. The new DNA requires a more coordinated and connected effort where HR “connects the dots” between diverse HR programs and emerging business needs. Here’s an example to illustrate the point.
Example – What if sales were up in Spain by 20% while at the same time the unemployment rate was decreasing to below 5%. Next assume that the turnover rate among the top sales people in Spain was over 20% and increasing, and it takes 3 months to train a sales person (and even then, over 30% of the new hires fail within three months).
In this example under traditional HR little would happen until a “requisition was approved”. However under the new DNA, HR would proactively act to mitigate the impact of these events by connecting the dots in the following manner:
- HR would increase “pre-need” recruiting to meet the increased demand even before any requisitions were generated.
- It would “over-hire” in sales positions by 30% and hire them three months before they were needed.
- It would increase retention efforts and fire the weak managers.
VIII. Changing who does most HR work
Traditionally HR professionals do most of the necessary HR work themselves. Unfortunately, in a rapidly changing global organization it is difficult for any centralized entity to make effective decisions on what and how things need to be done in a localized area. What is needed is for managers to accept their role as the primary deliverer of HR services. If managers are to be effective and if they are to take responsibility for their own people issues, then they need to be given some autonomy, useful information and be allowed to make most of their own people decisions. Traditionally HR has developed programs where one size fits all. The new approach will be “one size fits one”, where managers will be allowed to differentiate and to make localized decisions based on local needs and results. This shift toward managers doing most of HR will mean that line managers will be in full control of people issues. In addition, technology, self-service and ERP systems will take care of 75% of the remaining HR workload. The 25% remaining can be outsourced or it could be the new HR agenda. The current increase in the availability of technology now allows managers to begin accepting their expanded role without negatively impacting their functional responsibilities.
HR must drop its HR “cop role” where it warns of possible legal action and instead begin to shift into a role similar to that of a financial adviser. Instead of saying “no” to managers or focusing on developing more policies and procedures, HR will begin to give advice and data to managers on the probabilities, risks, and success factors for their potential solutions. HR must learn not to impose decisions, instead it will allow managers to make and own their “educated” people decisions. HR will shift from the cop role to that of expert or consultant on effective people tools and strategies.
HR has traditionally been treated like an overhead function that gets its budget cut every few years. However the new DNA demands a more responsive and performance focused department. As a result, HR must develop “service level agreements” with its business units. These agreements guarantee a similar level of service, responsiveness and accuracy to managers that business units traditionally provide for their customers. HR can assure that it is offering the right mix of programs by offering most HR programs on a fee for service (pay as you go) basis. Managers must have choices to use internally developed HR services, to develop their own people programs themselves, or to use external HR vendors. This pay at risk approach will drive HR to be more responsive to a manager’s needs. And the addition of “market forces” will allow it to directly tell how good of a job HR is doing, based on the revenue it receives and the demand for the programs it offers.XI. Changing the people and jobs within HR
Getting a job in an HR department does not require any specific degree or credential. Most of the current people in HR are strong in relationship building but they are often weak in business skills and experience. They often cry out “don’t do that… you might be sued,” but less than 10% of them have any legal training. The new DNA requires a major shift in the skill set that most of the current HR staff will be unable to make (in some cases nearly 50%). The “new” HR person will need to be strong in business and finance, have a solid technology background, as well as be risk taker and a metrics fanatic. The new HR professional will come into HR after a significant number of years in line management and direct P&L roles. Many current HR professionals lack the aggressiveness that will be necessary to survive in the more rapidly changing world of HR.
In addition, many HR jobs will change dramatically or go away entirely. Some of the anticipated job changes that will occur in the near future include:
- The job content of most HR jobs will change by 33%. (Metrics will be a high growth area)
- Compensation positions will be reduced by 75% as managers begin to make most compensation decisions using desktop tools (pay at risk will be the high growth area)
- Benefits jobs will be reduced by 90% as a result of self-service, personal portals and outsourcing (vendor management will remain a strong need)
- Almost all HR transactions will go away entirely
- Call center jobs will be reduced by 75% because of the growth of IVR and the company Intranet
- Generalist positions will be reduced by 1/2 because they have been unable to prove their value
- HRIS job will be reduced by 75% as the use of ASP’s and outsourcing models increase
- Recruiting will be down by 33% because of the ease of direct Internet recruiting by line managers
- Retention and metrics will remain hot issues with many new jobs
- Productivity improvement metrics, consulting on the most difficult problems and coaching will become the primary role of the HR department.
XII. 8 to 5 vs. 24/ 7 and smoke detectors
As more and more firms merge to become large global entities, all HR answers (services) will have to be provided 24 hours a day, seven days a week around the world. In order to provide that level of service, HR will be forced to become paperless and most HR “answers” will be provided directly to managers, electronically, through an extensive company intranet. Managers will have desktop “expert” systems, which will “walk them through” (step by step) their people problems. HR will also provide managers with “analytics” (statistical tools), which will help them identify the root causes of their current problems and perhaps even predict future ones. HR will also give managers “smoke detectors” (early indicators of potential problems). As a result, managers will be able to mitigate most people problems before they get seriously out of hand.
Because most HR databases are not inner-connected, HR systems fail to “learn” (through a feedback loop) when they make a mistake. For example, when a manager makes a bad hire (that must be let go) there must be a feedback loop to the original hiring system to ensure that we don’t repeat the same mistake again (e.g. use the same source again). Both HR failures and successes will provide input into the system so that the solutions we recommend to managers improve steadily over time.
Instead of assuming that HR is effective and “well liked” the new DNA demands that the satisfaction level of managers with HR services be measured directly. HR must learn to identify both its strong and weak program areas as well as to continually improve its responsiveness and accuracy rate to manager and employee questions.CONCLUSION
It’s clear that rapid changes to the business environment will no longer allow HR to remain unchanged. This new age of business will require a new set of skills and tools. Unfortunately, if past practice is any predictor, as many as half of the current HR professionals will not make the cut. In addition, as many as 75% of existing HR programs will be significantly modified or eliminated.
New HR programs must be developed faster, they must be more responsive, and their ROI must be measured periodically. Speed will be the new buzzword within HR. Programs will be developed rapidly and then continue to improve on an ongoing basis.
The new DNA requires more accountability, risk taking, rapid learning and most of all, it must provide proof that HR has had a direct impact on business productivity and profitability. If you are results oriented, a risk taker and a fast learner you are likely to thrive in the new DNA! However when looking at the HR departments that have already undergone a DNA transformation, it is clear that most HR professionals will either be unwilling or unable to handle this dramatic shift in the DNA of HR. Unfortunately the rapid changes in business will not allow HR professionals much time to grow into and to learn this new model. If you are to survive and prosper under the new DNA, you need to start now.